Kulim Poised to Reinvent Itself Following FY2021’s Stellar Results

Transforming to be a leading agribusiness company

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Kulim (Malaysia) Berhad (Image credit - JCorp)

Kulim (Malaysia) Berhad (KULIM) reported its best financial results in 2021 on record palm oil prices and improved operational efficiencies from its ongoing transformation programme to become a leading agribusiness company.

On the back of another challenging year arising from the prolonged COVID-19 pandemic and other external factors, KULIM turned in a Group profit before tax and zakat of RM433.81 million for the financial year ending 31 December 2021, reversing the previous period’s loss of RM316.45 million.

Revenue surged to RM1.65 billion (48.56%) from RM1.11 billion the year before despite lower sales volumes and yields from its plantations. This was achieved on higher average selling prices for crude palm oil and palm kernel, which increased by 60.66% and 77.64%, respectively. Together with lower impairment and provision expenses compared to a year earlier helped the Group to return to the black.

Under the circumstances, KULIM still managed to harvest 20.11 MT/ha from 22.93 MT/ha in 2020, this was higher than the industry average in Johor and Peninsular Malaysia of 17.73 MT/ha and 16.24 MT/ha, respectively. In the same period, the Group processed a total of 1,419,613 MT of fresh fruit bunches and produced 295,747 MT of crude palm oil (CPO). The oil extraction rate decreased to 20.83%, from 21.04%, yet remained higher than the industry average of 19.68% for Peninsular Malaysia and 19.92% for Malaysia as a whole.

“While we were operationally stretched by insufficient manpower, financially we stood to benefit from sky-rocketing palm product prices. This translated into one of our best financial results to date despite sub-optimum production and yield. We were naturally pleased with our financial windfall, yet it was with even greater pleasure to see the Group gradually shape up into the agriculture-focused, digitally enhanced, and sustainably run organisation that we envisage at the end of our current transformation journey,” said Mohd Faris Adli Shukery, Managing Director of KULIM.

He attributed the encouraging performance to the people of KULIM, its Board of Directors and management who were able to steer the company through the uncertainties and tough times.

In addition, the easing of restrictions on foreign labour entry enabled optimal harvesting operations by the Group to capitalise on the high CPO prices.

Moving Forward

KULIM is now set to expand its foray beyond oil palm plantation into an integrated agribusiness player. It is looking to strengthen its position in the midstream and downstream through partnerships and/or acquisitions of refineries and palm kernel crushing plants. It is also expanding its livestock business of cattle and sheep while exploring the possibility of partnering with a dairy producer.

The Group is also looking at building a robust and thriving agri-food portfolio to contribute positively to the national food security agenda.

“Our ultimate objective is for KULIM to become a flagship company that can enhance the state and national food security agenda. We will seek to establish a food marketplace for smallholders, large private players and government-linked companies,” said Mohd Faris.

A new business segment in KULIM, agro-farming includes intensive farming and mono-crop to supply quality vegetables and fruit for the Malaysian market. In doing so, it is adopting IR4.0 technology such as the Internet of Things (“IoT”) to further enhance crop management while leveraging automation to reduce labour requirements.

KULIM is also rolling out a structured Environmental, Social and Governance (ESG) Framework which will align its sustainability initiatives with its vision, strategy and goals.

As part of its commitment to ESG, KULIM is targeting to halve its carbon footprint by 2025 and has invested in expanding its renewable energy infrastructure in biogas plants that have helped cut the Group’s methane emissions by 90%. The initiative is also in line with KULIM’s business direction to expand its potential in green business which is expected to contribute positively to the Group’s earnings, as a new income stream.